December 09, 2019 Articles

The New York Child Victims Act: Coverage Implications and Issues

The passage of the act creates new sources of risk for both policyholders and carriers in light of lawsuits alleging abuse occurring decades ago.

By Frank Winston Jr. and William D. Carson[1]

On February 14, 2019, New York Governor Andrew Cuomo signed into law the New York Child Victims Act, [2] giving victims of child abuse suffered years and even decades ago a chance to pursue justice against their abusers and the institutions that enabled them. As a result of the passage of the act, insurers and policyholders can expect an avalanche of child sexual abuse claims in New York. Indeed, over 400 sexual abuse suits were filed on August 19, 2019, the first day of the “window” for filing such claims under the act, with hundreds and perhaps thousands more expected to follow, leading New York to designate 45 judges to deal exclusively with the expected claims. [3] These cases undoubtedly will spawn coverage disputes on a variety of issues, as discussed further below.

The New York Act

The New York Child Victims Act is notable in several ways.[4] Section 3 of the act creates a one-year look-back window, from August 14, 2019 until August 14, 2020, for otherwise time-barred claims, and also revives claims previously dismissed as time-barred or for failure to follow certain procedural requirements. The act also expands the civil statute of limitations for child-sexual-abuse-based claims to allow the claim to be brought until the victim is 55 years old. Given the fact that many modern insurance policies exclude sexual assault claims and many victims have delayed asserting their claims, the look-back window established by the act is almost certainly the most significant piece of the act from an insurance coverage point of view.

The act also modifies the judicial procedures relevant to child sexual abuse claims by eliminating the need to file a notice of claim against governmental entities, establishing a special trial preference for claims brought under the look-back window, and mandating that a chief administrator promulgate rules regarding revived claims. The elimination of the notice-of-claim requirement is itself significant in that it places private and governmental entities on equal footing with respect to child sexual abuse claims. Prior to the passage of the act, in order to sue a public entity, a victim would have had to file a notice of claim before filing suit—generally within 90 days of accrual of the action.[5] In addition to the limited time in which to bring a claim, most claims against a governmental entity also entitled the entity to a pre-complaint deposition of the putative plaintiff.[6]The elimination of these procedural obstacles will likely increase the number of claims asserted against governmental bodies such as school districts.

Other States’ Acts

New York is not alone in revising its laws to account for the fact that most abuse victims are unwilling to come forward until they are middle-aged.[7] Seventeen states and the District of Columbia have enacted laws effective this year that extend the statute of limitations for child sexual abuse claims,[8] and 16 states and the District of Columbia have passed revival windows for child sexual abuse claims.[9]

In 2003, California enacted a one-year look-back window, which led to 1,150 child sexual abuse suits that likely would never have been brought otherwise, and the prevalence of suits in California eventually led the Catholic Archdiocese of San Diego to declare bankruptcy.[10] Minnesota’s three-year window from 2013 to 2016 led to 1,006 suits, and Delaware’s 2007–2009 window for claims led to 1,175 suits.[11]

The New York Act’s Implications for Insurance Coverage Disputes

The effect that the act and similar statutes nationwide will have on insurance coverage litigation is likely to be significant. Overall, the act will lead to hundreds and possibly thousands of new cases alleging sexual abuse against a diverse range of entities, including Catholic dioceses in New York, hospitals, governmental entities such as school boards and school districts, and other well-known private groups such as the Boy Scouts. Insurance policies from the 1960s, 1970s, and 1980s will be asked to respond to the anticipated wave of litigation in New York courts precipitated by the act. Recognizing the risks it faces as a result of the passage of the act, the Archdiocese of New York has already preemptively sued 30 of its past and present insurers seeking coverage for future child sexual abuse suits.[12] The insurance industry has also taken note, with A.M. Best comparing the upcoming litigation created by the act and other similar statutes to asbestos liability, and several insurers have already increased their reserves in direct response to passage of the act.[13]

While certain claims-made policies currently in effect may provide coverage for some insureds and some causes of action—such as negligent hiring and retention claims against an organization—most policyholders will seek coverage under earlier occurrence-based general liability policies in effect during the ’60s, ’70s, and ’80s, when the abuse allegedly took place. These factual circumstances likely will raise a number of coverage issues, including those discussed below.

Lost/missing policies. Given the passage of time, proving up lost or missing policies likely will be a significant coverage battleground for many of the claims asserted under the act.

Under New York law, a policyholder seeking coverage from an insurer bears the initial burden of proving the existence, terms, and conditions of a lost or missing policy.[14] While the New York Court of Appeals has not expressly ruled on the standard required to prove the existence, terms, and conditions of a lost or missing policy, many courts applying New York law in missing policy cases apply a “clear and convincing” standard, as opposed to a “preponderance of the evidence” standard.[15]

Regardless of whether a “clear and convincing” or a “preponderance of the evidence” standard is applied, the policyholder seeking coverage bears the burden of proving both the existence and terms of any alleged policy under which it seeks coverage “by reliable and competent secondary evidence.”[16] Where alleged policies are missing or incomplete, policyholders will attempt to rely on available secondary evidence, such as oral testimony coupled with policies allegedly containing similar terms; correspondence coupled with the insured’s business records; or invoices coupled with specimen policies. Such evidence generally may be sufficient to create a factual dispute as to the existence of a policy, but it often fails to establish required terms and conditions regardless of the standard of proof applied.[17]

Do the alleged acts constitute an “occurrence” for coverage purposes? Another expected coverage battleground for claims under the act will be whether the claims at issue constitute an “occurrence.” It is well established under New York law that sexual assault is an intentional act by the perpetrator for which coverage is normally unavailable.[18] However, many policies state that whether an incident is an “occurrence” or “accident” within the meaning of the policy must be viewed from the perspective of the policyholder seeking coverage. In the context of sexual assault claims brought against organizations, the New York Court of Appeals has viewed this question through the lens of respondeat superior: To the extent that the organization’s employee was acting within the scope of his or her employment, any torts committed could be expected from the standpoint of the organization, and those not committed within the scope of employment may be considered an “accident” for purposes of insurance coverage.[19]

Unsurprisingly, sexual abuse is generally considered outside the scope of employment.[20] Accordingly, the nature of the claims asserted against the organization are a major factor in establishing coverage. Where a suit alleges only vicarious liability on the part of the organization, there is likely no coverage. But if a suit alleges independent liability on the part of the organization, such as negligent hiring or retention, New York courts may consider whether an “occurrence” or “accident” that could trigger coverage has been sufficiently alleged. In this regard, however, it bears noting that, rather than addressing sexual abuse committed by their agents, some policyholders have merely moved those agents to another location or taken other steps to avoid negative publicity.[21] To the extent that the insured was aware of the risk of sexual abuse and did nothing to prevent it or, worse, took affirmative steps to conceal the risk, any resulting incidents or injury should be considered expected or intended.[22]

Number of occurrences. Disputes over whether sexual abuse claims constitute a single occurrence or multiple occurrences likewise will be a source of coverage disputes. New York courts apply the “unfortunate events” test, which considers “whether there is a close temporal and spatial relationship between the incidents giving rise to injury or loss, and whether the incidents can be viewed as part of the same causal continuum, without intervening agents or factors.”[23] The inquiry focuses on the incidents giving rise to the damages, not the root cause of the incidents.[24]

For sexual abuse claims, most policyholders presumably will argue that each act of abuse constitutes a separate “occurrence” in an attempt to maximize available coverage. The New York Court of Appeals’ decision in Roman Catholic Diocese of Brooklyn, however, provides an example of not only how the dispute over the number of occurrences can play out but also how policyholders and insurers may argue for different positions depending on underlying facts, policy language, and a policyholder’s insurance program. In that case, a single priest abused a single victim over the course of several years in several different locations.[25] After settling the case for $2 million and “additional consideration,” the diocese sought reimbursement for the settlement payment and certain defense fees and costs from one of its insurers under two one-year policies in effect when acts of abuse allegedly took place. The diocese argued that under the language of the policies, which defined “occurrence” as “continuous or repeated exposure to substantially the same general harmful conditions,” the abuse at issue constituted a single occurrence, which required the exhaustion of only one $250,000 self-insured retention (SIR).[26] In contrast, the diocese’s insurer argued that the incidents of sexual abuse constituted multiple occurrences in each of the seven implicated policy periods and required the exhaustion of a $250,000 SIR for each occurrence that transpired within an implicated policy.[27]

In reaching its decision, the Court of Appeals recognized that situations involving multiple events, losses, or incidents could be deemed to be a single “occurrence” as defined in the policies. Nonetheless, the Court of Appeals rejected the diocese’s argument that the incidents of abuse at issue constituted a single occurrence, finding instead that the incidents did not share temporal or spatial characteristics.[28] The Court of Appeals also rejected the diocese’s reliance on the “continuous and repeated exposures to substantially the same general harmful conditions” language in the policy’s definition of “occurrence,” on the grounds that “[a] priest is not a ‘condition’ but a sentient being.”[29] In the court’s view, continuous or repeated exposure to conditions “sounds like language designed to deal with asbestos fibers in the air, or lead-based paint on the walls, rather than with priests and choirboys.”[30] The Court of Appeals thus concluded that the diocese’s argument that numerous, discrete sexual assaults were an accident constituting a single occurrence was “simply untenable.”[31] Accordingly, the Court of Appeals held that the diocese “must exhaust the SIR for each occurrence that transpires within an implicated policy for which it seeks coverage.”[32]

Allocation. Roman Catholic Diocese of Brooklyn also provides guidance on how allocation may be applied to sexual abuse claims. The New York Court of Appeals applied a pro rata allocation method for the sexual abuse claims at issue, relying on the policy language limiting coverage to bodily injury incurred “during the policy period.”[33] In the Court of Appeals’ view, pro rataallocation was the proper approach because

the policy’s coverage is limited only to injury that occurs within the finite one-year coverage period of the policy. . . . [A]ssuming that the minor plaintiff suffered ‘bodily injury’ in each policy year, it would be consistent to allocate liability across all implicated policies, rather than holding a single insurer liable for harm suffered in years covered by other successive policies.[34]

The Court of Appeals also noted that pro rataallocation was appropriate because the plaintiff, while able to remember distinct instances of abuse, was unable to state exactly when each instance took place and “could only give a broad time-frame in which the sexual abuse was perpetrated.”[35] These sorts of vague allegations may be expected in many complaints brought during the look-back window alleging events that occurred decades ago, and could result in similar allocation rulings depending on the facts at issue and the applicable policy language.

Conclusion

The passage of the act creates new sources of risk for both policyholders and carriers in light of lawsuits alleging abuse occurring decades ago. Victims of sexual abuse suffered long ago have already filed several hundreds of such of suits, and hundreds more are anticipated. Like other long-tail claims, such as environmental or asbestos claims, claims for suits brought under the act will likely present trigger and allocation issues, as well as the possibility of missing policy litigation. Furthermore, because of the way New York applies the concept of expected or intended loss to sexual abuse claims, the exact nature of both the claims and the allegations of the suits will be hugely influential in determining whether and to what extent coverage is available.

Frank Winston Jr. is a partner and cochair of Steptoe & Johnson’s Insurance/Reinsurance Practice Group. William D. Carson is an associate with the firm’s Insurance/Reinsurance Practice Group.

[1] Frank Winston Jr. is a partner and cochairperson of Steptoe & Johnson’s Insurance/Reinsurance Practice Group. William D. Carson is an associate in Steptoe’s Insurance/Reinsurance Practice Group. Both attorneys are based in Steptoe’s Washington, D.C., office. The views expressed herein are solely those of the authors, and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[2] The text of the act is available at 2019 N.Y. Sess. Laws § 214-gSee also N.Y. Assembly, Memorandum in Support of Legislation and Text of Bill No. A02872A.
[3] Eric Levenson, “More Than 400 Lawsuits Filed in New York Courts as Part of New Child Sex Abuse Law,” CNN, Aug. 14, 2019.
[4] Press Release, N.Y. State Office of the Governor,Ensuring Justice for Victims of Child Sexual Abuse: Governor Cuomo Takes Action to Ensure Prompt Attention to Legal Claims Filed Under the Child Victims Act(Sept. 12, 2019).
[5] N.Y. Gen. Mun. Law § 50-e(1)(a) (2019).
[6] N.Y. Gen. Mun. Law § 50-h (2013).
[7] Agusta Anthony, “New York Passes Child Victims Act, Allowing Child Sex Abuse Survivors to Sue Their Abusers,” CNN, Jan. 28, 2019.
[8] Nicole Friedman, “Insurers Face Risk of Child Sex-Abuse Claims: New State Laws Expand Statute of Limitations for Filing Suits,” Wall St. J., July 21, 2019.
[9] CHILD USA, 2019 Summary of Child Sexual Abuse Statutes of Limitations (SOLs): Introduced, Signed into Law and State Laws by Category.
[10] “San Diego Roman Catholic Diocese Files for Bankruptcy,” N.Y. Times, Feb. 28, 2007.
[11] CHILD USA, The Relative Success of Civil SOL Window and Revival Statutes State-by-State (as of Jan. 2019).
[12] Hailey Konnath, “NY Archdiocese Says Insurers Must Cover Sex Abuse Suits,” Law360, July 1, 2019 (requires subscription).
[13] Nicole Friedman, “Insurers Face Risk of Child Sex-Abuse Claims,” Wall St. J., July 21, 2019.
[14] Gold Fields Am. Corp. v. Aetna Cas. & Sur. Co., 173 Misc. 2d 901, 904 (Sup. Ct. N.Y. Cty. 1997)See also Emp’rs Ins. of Wausau v. Duplan Corp., No. 94 Civ. 3134(CSH), 1999 WL 777976, at *23 (S.D.N.Y. Oct. 20, 1999) (“Under New York law, a would-be insured who wishes to invoke coverage under a lost or missing insurance policy must establish the existence and contents of that policy.”); Boyce Thompson Inst. for Plant Research v. INA, 751 F. Supp. 1137, 1140–41 (S.D.N.Y. 1990) (the “party seeking to recover upon a lost instrument must prove its former existence, execution, delivery and contents”).
[15] See, e.g.Fulton Boiler Works, Inc. v. Am. Motorists Inc. Co., 828 F. Supp. 2d 481, 490 (N.D.N.Y. 2011)(“While [the policyholder] asserts that coverage must be proven by a mere preponderance of the evidence, the proper standard of proof appears to be by clear and convincing evidence.”); Md. Cas. Co. v. W.R. Grace & Co., No. 88 CIV. 2613 (JSM), 1996 WL 169326, at *2 (S.D.N.Y. Apr. 11, 1996) (quoting Boyce Thompson, 751 F. Supp. at 1140 (a party seeking coverage under a missing policy “must prove its former existence, execution, delivery and contents by clear, satisfactory and convincing evidence”). Cf. Gold Fields, 173 Misc. 2d at 905(adopting a “preponderance of evidence” standard). See also Pac. Emp’rs Ins. Co. v. Troy Belting & Supply Co., No. 1:11-CV-912, 2016 WL 5477758, at *10 (N.D.N.Y. Sep. 29, 2016) (discussing cases).
[16] Glew v. Cigna Grp. Ins., 590 F. Supp. 2d 395, 411 (E.D.N.Y. 2008) (citing Burt Rigid Box, Inc. v. Travelers Prop. Cas. Corp., 302 F.3d 83 (2d Cir. 2002)). 
[17] Pacific Employers, 2016 WL 5477758, at *14 (secondary evidence including board of directors’ meeting minutes, ledgers, and broker letters sufficient to create factual dispute as to existence of policies, but insufficient to prove terms); Boyce Thompson, 751 F. Supp. at 1140–44 n.2 (copies of later policies, ledger sheets showing broker payments, broker affidavit, and a “renew” reference insufficient to establish existence, terms, and conditions).
[18] See, e.g.Doe v. Allstate Ins. Co., 187 A.D.2d 181, 183 (N.Y. App. Div. 4th Dep’t 1993) (“acts of sexual abuse are intentional in nature”).
[19] RJC Realty Holding Corp. v. Republic Franklin Ins. Co., 777 N.Y.S.2d 4, 6 (2004).
[20] Judith M. v. Sisters of Charity Hosp., 93 N.Y.2d 932, 933 (N.Y. 1999).
[21] Scott Dodd, “Pennsylvania Grand Jury Says Church Had a ‘Playbook for Concealing the Truth’,” N.Y. Times, Aug. 14, 2018.
[22] See Diocese of Winona v. Interstate Fire & Cas. Co., 89 F.3d 1386, 1396 (8th Cir. 1996)Interstate Fire & Cas. Co., Inc. v. Roman Catholic Church of the Diocese of Phoenix, No. CV 09-01405-PHX-NVW, 2012 WL 12871199, at *2 (D. Ariz. Aug. 31, 2012).
[23] Roman Catholic Diocese of Brooklyn v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 21 N.Y.3d 139, 148 (N.Y. 2013) (quoting Appalachian Ins. Co. v. Gen. Elec. Co., 8 N.Y.3d 162, 171–72 (2007)).
[24] Roman Catholic Diocese of Brooklyn, 21 N.Y.3d at 149–50.
[25] Roman Catholic Diocese of Brooklyn, 21 N.Y.3d at 149.
[26] Roman Catholic Diocese of Brooklyn, 21 N.Y.3d at 151.
[27] Roman Catholic Diocese of Brooklyn, 21 N.Y.3d at 145.
[28] Roman Catholic Diocese of Brooklyn, 21 N.Y.3d at 149–50See also Verlus v. Liberty Mut. Ins. Co., No. 14-cv-2493 (NSR), 2015 WL 7170484, at *4–5 (S.D.N.Y. Nov. 12, 2015) (attack by two dogs involving two people at the same time a single occurrence under the unfortunate events test).
[29] Roman Catholic Diocese of Brooklyn, 21 N.Y.3d at 151 (quoting Lee v. Interstate Fire & Cas. Co., 86 F.3d 101, 104 (7th Cir. 1996)). 
[30] Roman Catholic Diocese of Brooklyn, 21 N.Y.3d at 151.
[31] Roman Catholic Diocese of Brooklyn, 21 N.Y.3d at 151.
[32] Roman Catholic Diocese of Brooklyn, 21 N.Y.3d at 153.
[33] Roman Catholic Diocese of Brooklyn, 21 N.Y.3d at 148.
[34] Roman Catholic Diocese of Brooklyn, 21 N.Y.3d at 154.
[35] Roman Catholic Diocese of Brooklyn, 21 N.Y.3d at 154.


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